The indictment says the prescription drug resale scheme made $14 million in profits on sales of $58 million. / macro_jarek Getty Images/iStockphoto

by Walter F. Roche Jr., The Tennessean

by Walter F. Roche Jr., The Tennessean

NASHVILLE, Tenn. -- The company at the heart of a nearly $60 million illegal prescription drug operation was able to get a Tennessee drug distributor's license even though one of its principals had an extensive criminal record.

Records show that Charles J. Edwards, 52, who recently pleaded guilty to mail fraud in federal court, has multiple prior arrests and has served time in prisons in Texas and Georgia. He pleaded guilty in 1993 to aggravated sexual assault and in 1994 was charged with indecency with a minor.

Other charges against Edwards include theft and marijuana possession. A theft charge last year in Texas was dismissed.

Yet despite that history, his company, Cumberland Distribution, was able to get a pharmacy license from the state in 2006 and maintained it even after the company was shut down in 2009 after a federal raid, records show.

That's because Edwards' name did not appear on the application or any of the other records for the company on file with the state Health Department or the state Board of Pharmacy, said Woody McMillin, a spokesman with the state Health Department, in an email response.

The U.S. Food and Drug Administration raided the company's Nashville warehouse in 2009, and the state was aware of the federal investigation, McMillin said.

Under state law, managers or owners of firms applying for a pharmacy license must undergo a criminal background check.

"The results of a criminal background check for the owner or manager of the facility seeking licensure, must be submitted directly to the Board of Pharmacy by the vendor identified in the Board of Pharmacy's licensure application materials," according to state guidelines.

In addition, Tennessee rules require proof that the "applicant is of good moral character, or, if the applicant is a partnership or corporation that the managing officers are of good moral character."

The pharmacy wholesaler application submitted for Cumberland listed several officers, but not Edwards.

McMillin did not respond to an emailed question asking whether Edwards' criminal record would have disqualified the company from getting a license.

Edwards and his wife, Brenda, 43, entered guilty pleas last week in U.S. District Court in Nashville. The indictment charges that they purchased old pills from street dealers, repackaged them and sold them as new to pharmacies across the country.

The indictment says they made $14 million in profits on sales of $58 million.

Lawrence Arnkoff, Charles Edwards' attorney, reached by The Tennessean on Thursday, said there was no allegation in the case that any of the medications had caused any harm to patients.

Texas business records show that Edwards and a third defendant, Jerrod Smith, have been involved in several other drug companies, including International Prescriptions, which was based in Houston.

Federal prosecutors said that Smith and Charles Edwards "owned and operated" Cumberland. Smith is still awaiting trial in federal court.

Corporate records for Cumberland Distribution filed in Tennessee in 2007 list Smith as president. The company was cited several times for failure to file required annual reports.

Cheryl Crawford, a Texas resident, was listed as vice president and treasurer. No charges have been filed against her.

State Pharmacy Board records show that Cumberland was first licensed in Tennessee on Dec. 20, 2006. The license expired on March 31, 2010.

The firm also had licenses in several other states, including California and Ohio.

A Houston lawyer, Richard Tholstrup, was listed as the firm's registered agent. Tholstrup said Thursday that he filed the incorporation papers and had nothing further to do with the company. He said he was unaware of the guilty pleas.